Is fund performance driven by flows into connected funds ? : spillover effects in the mutual fund industry

Zhu, Bing (Technical University of Munich, Germany) ; Woltering, René-Ojas (Ecole hôtelière de Lausanne, HES-SO // University of Applied Sciences Western Switzerland)

Mutual funds are connected with each other through overlapping portfolio holdings. We document that the performance of individual mutual funds is affected by spillover effects from fund flows to connected mutual funds. Spillover-effects are particularly pronounced during crisis periods, when a one standard deviation increase in flows to the tercile of funds with the highest overlapping portfolio holdings is associated with a monthly excess returns of 1.50%. Small cap stock funds are more heavily impacted, suggesting that the spillover effect is related to underlying asset liquidity. Moreover, we shed light on the dark side of diversification, as highly diversified funds are more exposed to the spillover risk factor.


Keywords:
Article Type:
scientifique
Faculty:
Economie et Services
School:
EHL
Institute:
Aucun institut
Subject(s):
Economie/gestion
Date:
2021-02
Pagination:
28 p.
Published in:
Journal of economics and finance
Numeration (vol. no.):
To be published
DOI:
ISSN:
1055-0925
Appears in Collection:



 Record created 2021-03-30, last modified 2021-04-06

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